Moderation effect is a commonly used concept in the field of social and behavioral science. Several studies regarding the implication of moderation effects have been done; however, little is known about how partial measurement invariance influences the properties of tests for moderation effects when categorical moderators were used. Additionally, whether the impact is the same across single and multilevel data is still unknown. Hence, the purpose of the present study is twofold: (a) To investigate the performance of the moderation test in single-level studies when measurement invariance does not hold; (b) To examine whether unique features of multilevel data, such as intraclass correlation (ICC) and number of clusters, influence the effect of measurement non-invariance on the performance of tests for moderation. Simulation results indicated that falsely assuming measurement invariance lead to biased estimates, inflated Type I error rates, and more gain or more loss in power (depends on simulation conditions) for the test of moderation effects. Such patterns were more salient as sample size and the number of non-invariant items increase for both single- and multi-level data. With multilevel data, the cluster size seemed to have a larger impact than the number of clusters when falsely assuming measurement invariance in the moderation estimation. ICC was trivially related to the moderation estimates. Overall, when testing moderation effects with categorical moderators, employing a model that accounts for the measurement (non)invariance structure of the predictor and/or the outcome is recommended.